Hospital productivity and intensity trends: 1980-87

This paper takes advantage of a unique set of annual MONITREND data from the American Hospital Association (AHA) to study the effects of Medicare's Prospective Payment System (PPS) and other public/private programs on hospital productivity and intensity between 1980 and 1987. The results on over 30 cost centers show major improvements in inpatient productivity per discharge in the first two years of PPS--improvements that are largely attributable to shifts of care to the outpatient department. Inpatient intensity, which was growing 4.5% annually between 1980 and 1982, turned negative from 1983-85 due to this shifting locus of care. Productivity per intermediate service also improved but at a slower rate because of the large declines in inpatient volumes. Productivity improvements were greater in urban hospitals, resulting in slower cost inflation and a better financial position compared with rural hospitals.